The minister for welfare reform, responding to an urgent question in the House of Lords today, said: ‘The housing benefit regulations will be amended in March 2014 to ensure that all working-age social sector tenants who underoccupy their homes are subject to a reduction in their eligible rent, regardless of the length of their tenancy, unless they fall within one of the limited exceptions.’

The DWP admitted last week that an error in existing regulations means the bedroom tax should not have been charged to tenants who have lived in their properties since before 1 January 1996 who have been continuously claiming housing benefit. The DWP issued a circular last week saying councils should consider whether they are ‘reasonably able to identify potentially affected claimants’ and that exempted tenants should be refunded all the money deducted under the policy since 1 April.

Labour peer Lord William McKenzie, said: ‘I would like to ask the minister how the government are going to rectify matters for individuals who are denied their full benefit entitlement to date, whose rent arrears may have affected their credit rating, who have moved house in response to the tax and given up their security of tenure, or who have fallen into the clutches of private sector landlords who are now intent on evicting tenants claiming housing benefit? Is not this mess a further reason to scrap this wretched tax?’

In response, Lord Freud said: ‘The numbers involved in this anomaly are small and the amounts are modest.’

The amended regulations would be unlikely to prevent tenants retrospectively claiming money deducted for the period while the loophole was open.

A DWP spokesperson said the precise date of the amendment to legislation would depend on the parliamentary timetable.